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The W-2 and 1099 trucks have a lot of differences in them. This article will focus in detail on how both the W-2 and 1099 file and pay their taxes.

One of the most significant differences between W-2 and 1099 drivers is that a W-2 worker is classified as an employee and the taxes are deducted from their salary prior to the employee receiving their pay. The employer of the W-2 employee is liable for remitting their taxes to the applicable governmental agencies. The 1099 worker is allocated as a contractor, and the 1099 worker does not have taxes deducted from their salary. The 1099 contractor receives the full gross amount as their salary. The trucking company that has the working 1099 worker has zero responsibility for remitting the taxes. The payment of tax or tax remittance is the total responsibility of the 1099 worker.

The W-2 form is issued by the company to the employees at the end of the year and the 1099 form is what the company issues to the contractor by the end of the year. Both the W-2 and 1099 forms indicate the total amount of money earned by the worker in the given year. The W-2 amount will depict the information about the total amount of taxes deducted. Whereas the 1099 reports will only describe the total amount of earnings.

This article will discuss in detail the W-2 tax differences and the 1099 tax difference and what kind of form both types of workers receive.

Form W-2:

In the trucking industry, all the company drivers are considered W-2. All the hourly or salaried workers who are hired to perform a specific task. The trucking company provides a schedule, a persistent paycheck, benefits, and a company truck to the W-2 worker.

During the tax season, the employers provide W-2 forms to the employee and the IRS. The employer will report the annual compensation paid to the employee and the tax deducted from the compensation for the federal income taxes, state income tax, and taxes remitted for social security and Medicare.

The employer of the W-2 employee had already withheld the federal taxes and state income taxes, Medicare taxes, and Social Security tax. Therefore, all these amounts are included on the W-2 form which is received from the employer when used to file taxes.

The employer must mail Form W-2 to the employee by January 31st of every year. The filing of taxes as a W-2 employee is a lot simpler in comparison to filing taxes as a 1099 worker. The income tax return is the process in which a taxpayer will survey what amount of tax has been withheld by the employer throughout the year. In this case, if the tax was over withheld there would be a tax refund issued to the W2 employee by the IRS and state. If the employer did not withhold enough in taxes, then the employee would be required to pay the IRS the amount of taxes that are still due.

For deductions, especially for truck drivers, the W-2 drivers cannot deduct the Per Diem deduction. Most W-2 drivers opt for Standard Deduction, in case they have a lot of medical expenses or if they have significantly dealt with a loss due to a natural disaster.

The standard deduction is an IRS deduction of every taxpayer which is used on reduced taxable income. As such there are no formalities for the taxpayer to receive the Standard Deduction. It is an automatic allowance for every taxpayer when filing their tax return.

Form 1099:

The 1099 workers do not have a single employer and they have been contracted with several customers who have worked the whole year. It is so because they have ownership of the business and usually contract their services. The 1099 workers are totally responsible for reporting their income to the IRS, paying self-employment taxes (that usually cover Social Security and Medicare), and paying income taxes. The companies that hire 1099 contractors do not have to pay or remit taxes on behalf of the 1099 contractor.

The common types of 1099 truck drivers are:

• Independent contractors who own their loads, or own their equipment and run according to their own schedule.
• Those who opt for long-term rigid work arrangements with a specific carrier.

Form 1099 is a document that is used by companies for reporting payments made to the contractor for the jobs performed in the prior year. The companies who pay their contractors $600 or more during the year must issue the form 1099-NEC by January 31st of the calendar year. The company which issues the contractor a 1099-NEC is responsible for filing the 1099-NEC with the IRS from January 31st of the following year.

The contractors pay a self-employment tax in case the companies do not withhold or remit social security or Medicare taxes for them. The tax rate for self-employment is 15.3%. It is more complicated because the income of up to $147,000 is subject to Social Security tax therefore, all the income is subject to Medicare Taxes.

The 1099 contractors have a lot of freedom than the W-2 workers in terms of tax payments and the number of deductions. It is recommended that 1099 contractors set aside 20-25% of the net income for making quarterly payments of taxes. The IRS requires self-employed individuals to pay taxes quarterly. If this is not followed, there is an IRS penalty when filing the tax return on top of a much higher one-time payment of tax.

The 1099 workers are eligible for the deduction of Per Diem, unlike W-2 workers. The tax cuts and Jobs Act, have allowed significant additional tax deductions from the Qualified Business Income Deduction or QBI. The QBI is a 20% pass-through deduction which is calculated from the less of the self-employment on the overall taxable income. 1099 workers can deduct health insurance premiums and business expenses on top of the standard deduction. Self-employed individuals are subject to a complicated tax filing process as they are eligible for more deductions.